Hey Ocicat,
Genre borders aren't always distinct... of course, as you know. I would call this story straight-up contemporary fantasy (and for me, it's pretty clearly in the fantasy genre), but you could surely make an argument for it being magical realism.
I haven't hopped over to the wiki page, but I expect what's going on in terms of sub-genre confusion is that magical realism is usually associated with a kind of post-colonial literature that has to do with the inflection of western forms (particularly the novel) with indigenous belief systems. So, you get Isabelle Allende, Gabriel Garcia Marquez, Salman Rushdie, and so on, writing magical realism (even possibly Toni Morrison depending on how you want to classify things).
Because of that, the term magical realism has a bit of a political edge to it, especially it's used in academic circles. Academics can sometimes get a little fiddly about calling stuff by white, western people magical realism.
It's fairly popular among writers, as opposed to like literature PhDs, to talk about magical realism as something decontextualized from its sociopolitical origins. It's probably a sloppy use of the term, but language is a living entity, blah blah. A lot of times when you hear a writer talking about magical realism (or a reader talking about it in a nonchalant context) they mean "a work that contains fantasy, but also uses more literary devices." It's a way for writers to sort of position themselves on the boundary of literary and mainstream.
Here's how I use contemporary fantasy and magical realism:
"Wisteria" doesn't quite, IMO, hold up when subjected to literary expectations -- which, you know, it doesn't need to; it's a fantasy story. It seems, to me, to be playing a lot more within the expectations of the fantasy genre, in terms of how the story is structured, than it does with literary tropes. So, I'd call it contemporary fantasy.
Next week's story, "Magic in a Certain Slant of Light" by Deb Coates, initially appared in Strange Horizons and was reprinted in Best Paranormal Romance. The author, Deborah Coates, regularly publishes in Asimov's. So clearly, the story has genre credibility. At the same time, I think the story fulfills literary expectations as well as fantasy expectations, and could have been published in one of the more liberal mainstream magazines. So it feels more like magical realism to me.
A lot of people use the term "slipstream" interchangeably with magical realism, though I tend to reserve it for describing things that are really fucking weird, particularly when they exemplify elements of more than one genre. Like, when they have both magic and high technology, but in a modern sort of voice.
So: in summary -- magical realism or contemporary fantasy... you could call it either, and be right. ;-)